Shares of Netflix are falling after Friday after the video-streaming company’s fourth-quarter earnings showed slowing subscriber growth and operating profit margin pressure. As of Friday morning, shares had fallen more than 20% and were trading below $400. Netflix cited increased competition and the strong U.S. dollar among the reasons for its disappointing report.
But analysts believe Netflix report speaks to the broader streaming industry – they indicate that there may be little growth left in the streaming industry. Netflix added 8.28 million global paid net subscribers in the last quarter of 2021, beating the 8.13 forecasted by analysts, according to Bloomberg data. But its outlook wasn’t too inspiring. The company expects to add 2.5 million subscribers in the first quarter, compared to 3.98 million during the first quarter last year.
Thus, while shares may have dropped, investors need to think it twice before ‘buying the dip, ’ as the streaming industry becomes saturated with new competitors such as Disney which offers more than just streaming while other companies like HBO and Amazon Prime are increasingly enhancing their offering. Interestingly, Netflix’s competition also includes ‘sleep” or just anything else users are doing with their time out of Netflix.
Analysts including Morgan Stanley, KeyBank, and Barclays all downgraded Netflix shares on Friday. Still, the company has potential, and most analysts recommend a buy, though they have cut their price expectations.
Read more about Netflix earnings, and outlook for the streaming industry.
